Venezuela’s state oil company, PDVSA, is now requiring that all oil transactions be conducted with companies holding individual licenses from the U.S. Government, a policy shift implemented over the past two weeks, according to reports from Reuters.
The move is intended to mitigate legal risks stemming from the interpretation of U.S. Sanctions, sources within the sector say. The restriction is reportedly limiting Venezuela’s oil exports and hindering its ability to reduce storage levels, which are nearing capacity.
Although the Trump administration issued a general license in January to broaden energy trade with Venezuela, market participants contend it has proven insufficient. The broad nature of the license has left many conditions open to interpretation, creating uncertainty about what activities are permitted and prohibited, sources told Reuters.
PDVSA executives have requested clearer guidance from the U.S. Government regarding specific companies with which trade is permissible, as well as more defined commercial terms to track shipments and ensure revenue, Reuters reported.
Financing has emerged as another significant obstacle. U.S. Financial institutions are adopting a cautious approach due to the legal complexities, with some potentially unwilling to process transactions under the existing licenses or to deem the activity authorized. This reluctance is disproportionately affecting smaller market players, while larger trading firms like Trafigura and Vitol – which already possess specific permits – have sufficient cash flow to operate without immediate reliance on bank credit.
The U.S. Administration defends the speed of its licensing process. “The President’s team is working tirelessly to address applications from oil and gas companies,” stated spokesperson Taylor Rogers to Reuters.
The Office of Foreign Assets Control (OFAC) recently issued two additional licenses allowing energy giants Chevron, BP, Eni, Shell, and Repsol to expand their operations in Venezuela. However, the Treasury Department emphasized guidelines to prevent financial irregularities.
In early February, the U.S. Authorized the supply of diluents – a crucial component for Venezuela’s heavy crude oil – to the country, according to Reuters. This move is intended to facilitate Venezuelan oil exports to the U.S., with a potential value of $2 billion, as previously discussed in January.
